Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
BancFirst in Focus
BancFirst (BANF) is headquartered in Oklahoma City, and is in the Finance sector. The stock has seen a price change of 13.03% since the start of the year. The Oklahoma financial services holding company is paying out a dividend of $0.3 per share at the moment, with a dividend yield of 2.13% compared to the Banks - Southwest industry's yield of 1.13% and the S&P 500's yield of 1.95%.
Looking at dividend growth, the company's current annualized dividend of $1.20 is up 17.6% from last year. In the past five-year period, BancFirst has increased its dividend 5 times on a year-over-year basis for an average annual increase of 12.34%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. BancFirst's current payout ratio is 31%, meaning it paid out 31% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, BANF expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $3.89 per share, with earnings expected to increase 1.83% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that BANF is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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